Question: Two firms face the following profit matrix: Given these profits, Firm 2 wants to match Firm 1s price, but Firm 1 does not want to

Two firms face the following profit matrix:

Firm 1 Low Price High Price 0 Low Price Firm 2 7

Given these profits, Firm 2 wants to match Firm 1’s price, but Firm 1 does not want to match Firm 2’s price. Does either firm have a dominant strategy? Does this game have a unique, pure- strategy Nash equilibrium? Identify all pure- and mixed- strategy Nash equilibria.

Firm 1 Low Price High Price 0 Low Price Firm 2 7 High Price 0

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